alexander and senator enzi and to welcome our new colleagues, wonderful to see you here. thank you, mr. chairman. >> i think our first panel, thank you, miss hyde, for being here. we will call our second panel, dr. michael hogan. .. >> on sunday flint and hillary

man leverett argue a change in policy toward the government of iran is necessary. that's at 9 a.m. eastern. at 3 p.m., williams rhodes explores the financial challenges facing europe and asia. watch these programs and more all weekend long on booktv. for a complete schedule, visit booktv.org. >> next, from politics & prose bookstore in washington, d.c., thane gustafson looks at how russia's unstable economic and political systems could impact the country's oil output with 12% of the world's oil supply coming from rush b shah, he also explores what this could mean for the global economy. this is a little under an hour. >> a pleasure to see you all here tonight. as we know, happinesses is a relative thing, and i began the day this morning in the

dentist's chair having a crown put in, and here by tonight i'm at politics & prose. so i'm a very happy man having gone from one extreme to the other. so it's a special pleasure to welcome you all here tonight and, gosh, standing room only. so this is marvelous. well, i thought i would begin by telling you a few stories about what the book is about and skipping the big structure and simply tell you some stories about some of the people who are in this book, because in the end it's very much about real people. so what kind of book is this? it's big, it's heavy -- [laughter] it's, you know, you may open it with a certain trepidation. but what it is is a memoir, first of all, a little bit of a memoir of my travels in russia. it's a memoir of a firm of the

people -- of a number of the people who are in the book. we've gone through 20 years together, is so it's a memoir of the last 20 years since the soviet union fell apart. it's a history. it's a history of the oil industry, but also in parallel it's a history of russia these past 20 years. the initial collapse in the 990s and then the gradual recovery the decade after. so we end up with the russia that we see today after this long psych, and the -- cycle. it's a biography. it's a multiple biography of a number of people, but in particular of the clan that emerged in the 1990 from the city of st. petersburg. and came to moscow with putin in the year 2000. and you could sum up the last 20 years of russian history by saying that this is the revenge of st. petersburg over moscow as the clans from st. petersburg

take over and are very largely without much exaggeration are in command. this is very much a st. petersburg crowd. is so a history of the emergence of that crowd, and this is the latest chapter in the 300-year rivalry between the two capitals, so it's a tale of two cities. it's a murder mystery, but i can't give you the names of the -- [laughter] the guilty ones in every case. but you can draw your own conclusions. there are some marvelous unsolved mysteries that may be unraveled someday. most never will. it used to be said in russia in the 1990s that you could tell if a business was profitable from the trail of bodies that led to the front door of the business involved. if there were no bodies, it wasn't worth paying attention to because it couldn't possibly be profitable. i'll leave it to your imagination why, for example,

the international red cross was highly profitable by that measure in the 1990s in russia. one clue is the subsidies that you could get for the import of tax-free tobacco and alcohol to benefit good causes such as the red cross. this was profitable and, therefore, of interest. it's even a science fiction story. because what we're dealing here really when you come right down to it is the meeting of two alien civilizations after 70 years of the soviet period. the oil industry in particular grew up in almost complete isolation from the west, and this is virtually a unique case. we have other places where oil industries have grown up, where oil industries are run by national oil companies, but in almost every case -- in fact in every case -- these industries were first founded by foreigners

and then were taken over. not so in the case of russia where from the 1920s on at any rate or for all practical purposes the oil industry was home grown and developed its own culture, its own civilization even as the soviet union did with its own language and its own culture. i sometimes like to tell my classes that the story of russia in the 20th century is very much that of a people who decided that capitalism didn't work, so it's as though they all piled into a space capsule and took off and landed on the planet mars and started a completely different civilization in which the market was thrown out and prices and profits and private ownership and built that civilization and actually made it run for nearly six, seven decades. not well, but it ran. and then they decided that it wasn't working particularly well, so they all piled back into their space capsule and came back to earth.

which is something remarkable. this is something russians do every so often. they will conduct these massive social science experiments on themselves. this isn't the first time they've done it. so here they are back on earth again, and the oil industry suddenly faced the world oil industry. and so the book is very much how these two civilizations have come to terms with one another which has not been easy because these past 20 years have been a time of revolution in the global oil industry. so suddenly you land on earth, and you suddenly find yourself at least in the oil industry face with the a race. -- faced with a race. the question is, how have the russians done in that race? talented oil people that they are, talented engineering culture that they are. that's part of the story. the book is, has tragic heroes and tragic anti-heroes, one of whom is in jail, mikhail fedder

cover sky, and i wanted to avoid making this his story, and yet in the end this man who was briefly the richest man in russia who ran the most successful private oil company in russia at the time of his arrest in 2003, this man has been in jail now or for nearly ten years. in october 2013 he will be -- he will have been in jail for ten years. and this very much is the result of a blood match with his nemesis, vladimir putin. and, of course, one of the big questions is, when will he get out? no one knows. but the other question is, what exactly did he do? and there has been a great deal of coverage of mikhail. and i didn't want to add to that whole literature.

but what i have tried to do is to go into his company, and i've had interviews with a number of the players in that company to try to find out what was unique about that company that he built, what was unique that enabled it to double oil production within four short years? how was that done? and so you'll find there is a chapter on that side of the story. and then lastly i have to say that this is a story of guilty love, which i'll come back to if you ask me. so what's the book really about? all right. let me give you the main points here, and i'll keep this brief because the basic structure, the skeleton of the book is something that's quickly told, and it's basically an analysis. it culminates in a prediction. this industry which is now at this moment the world's largest

oil producer because the saudis have throttled back, so the saudis and the russians play tag with one another, they alternate, they vie with one another over who is the world's largest oil producer. the russians at this moment are ahead. they have moved up very slightly to very near the soviet level of production. meanwhile, the saudis have throttled back in order to moderate the -- well, why are they, as a matter of fact? why are they throttling back? we can come back to that. so anyway, there we have the russians who are the number one oil producers. but they have essentially been coasting on the assets inherited from the soviet union, from another time and another place. and such was the wealth of what was discovered, such was the wealth of what is still producing 60% of russian oil production today is, comes from fields that were already in

production at the time of the collapse of the soviet union. virtually all of russian oil today comes from fields that were already known in soviet times. there have been very few new discoveries that are producing today. the drama of the situation is that the inheritance is now starting to run down, and the place to look is west siberia which has been the producing core of the soviet oil industry since the 1960s, has been the locomotive of this industry for half a century, and it is now in decline. now, that doesn't mean that the russians are running out of oil. there are phenomenal reserves, and, of course, i'm not even talking about natural gas which is a whole different story. the future of russia will be natural gas, not oil. but let's stick with oil for the moment. there is plenty of oil left.

but as you move out of that inherited comfort zone, you move to areas that are deeper, that are colder, that are sourer, that are more complex, that are more distant, that are offshore. in a world, you move to oil that is more costly if only because now you have to invest in it instead of just inheriting it. and the result of that is that it's going to be less profitable. now, the reason that matters is that the oil industry has a very important customer, and that's the russian state. and the russian state for the past two decades and, indeed, going back to soviet times but particularly in the past 20 years, the russian state has become extremely dependent on the revenues from oil and, indeed, the rents, the pure

remits from the soviet legacy these past 20 years. to a greater extent than the soviet state ever depended on oil. and that dependence is growing, and you can show that on the graphs, you can show that on slides that i occasionally use in presentations. you can show that percentage of the russian budget that comes from oil and gas revenues, and it is going up and up and up, and in round numbers in 2012 it passed the 52% mark. that's oil and gas revenues together, but it's very largely oil. and to put that in perspective, you have to add that the russian budget it is growing very rapidly to support the, first of all, some of the same obligations that we find ourselves increasingly supporting, namely an aging population, a pension system and the like.

but in addition to that, the budget has to support the growing ambitions of the putin leadership to increase funding for defense, funding for infrastructure, for the renewal of industry and, indeed, shall we say for the support of the many clans that provide the basis of support for the regime. this sets the stage, these two things, these two trends, the increasing dependence of the russian state on oil and gas revenues to field an expanding budget and the impending increase in costs in declining profits from oil and gas, this sets up if you visualize it in your minds two contrary curves that are going to intersect somewhere. and result in crisis. the russian oil industry in its next generation is simply not going to be able to support the growing level of expenditure

that is basic to the russian system, to the russian state system that we see today. and that's the core argument of the book. the russian state can't help itself. it is effectively addicted. but the russian oil industry can't help it because it has, in effect, had 20 years without having had to compete, to innovate. it is not ready at this moment to compete in the same way that the world oil industry is now competing for new sources of oil, for new technology and, indeed, is causing a new revolution in oil around the world. the russian oil industry is not yet ready to do this. it will be, the question is how fast. it will be, the question is what incentives will the russian

state provide. at what point will this intersection take place? so i'll stop there. that is the core of the book, and why don't we open the floor for questions and answers and take the discussion wherever it goes. oh, good, there's another microphone. that's great. good. >> i'm sitting near the microphone, so i'll take the -- i'll grab my chance here while i can and be first in line. your last, the last idea that you just presented us with is sort of the central idea that, um, that the regime now faces the problem of coming up with the technology and the

wherewithal to expand to invest in the industry and develop the industry more than they have in the recent past. is the, is there -- do they have -- i mean, i think of russia as being fairly tech lodge chi competent. do you see any great dependence that they're likely to have for any number of years in p developing their own lek lodge -- technological capability, either the educational foundation of it or just any other aspects of oil and gas technology and so forth that they can't produce, come up with on their own reasonably, reasonably inexpensively or at least in comparison to what they have to sort of come up with if they have to deal with the rest

of the world, and if particular, of course, whether they'll be forced to look to the u.s. or to the sort of traditional western position for that. >> well, thank you for that question. that is, indeed, the central question. that is the question that needs to be raised next. let me say, first of all, to put things in perspective that when i say that the russian oil industry is not ready, and i'm going to take a few minutes to answer this question, so i hope i won't keep you standing too long, we're talking about extremely clever people. and we're talking about people who are not standing still. so the right way to think of it is moving fronts. the world oil industry has been moving so fast that what we're talking about is a russian industry that although it has been moving forward has not been

moving forward at the same rate, at the same pace. and so there is that gap and, indeed, perhaps a widening gap. now, in some, in some instances that gap is quickly overcome. and let me give you an example. the famous fracking that we're hearing so much about. the russians, first of all, will tell you that they invented fracking, okay? so i've looked into this quite a bit. it turns out that it's not quite true. the first fracks were done in the united states in the gas industry, i believe in missouri in 1947, if i remember correctly. and fracking, by the way, has been used in the gas industry on a massive scale ever since. so suddenly we've become aware of fracking, but in actual fact it's been going on beneath our eyes, beneath our notice all along. the people who brought it back, however, were the canadians who

brought it to russia in 1988, then bigtime after the soviet union fell apart. and fracking started to be applied on a massive scale starting in about 1998. now, the point of the story is even though it was new to the russians practically speaking in 1998, by 2000, 2001, it had become a russian business, and there were russian companies and russian crews who were doing fracking at the, you know, on a massive scale. so this gives you one measure of lag, and the lag quickly overcome. at the opposite extreme, however, are techniques that are completely new to the russians and that require a whole different order of capability, because they are so much more difficult. and the prime example is arctic offshore. now, there are two examples in

the world of countries that have gone from 0 to 60 in developing world-leading capability for arctic offshore. norway and now brazil. those two are really the touchstones. they are the benchmarks. and what those two examples tell you is that it takes about 20 years. if you do it right and you develop your own home grown industries for arctic offshore and you start doing it and you take your licks and you make your mistakes but you start logging your achievements, it takes you 20 years, from zero to the forefront. where the russians are at this moment is effectively zero. again, because they didn't have to. they had no need to go off into the arctic offshore. so the starting gun is now. and it'll be very interesting to see where they do as well as the norwegians and the, and the

brazilians in developing from scratch a home grown industry that can perform at the top of the world's standards. now, you asked a question about the role of the western companies in this. they have enlisted the western companies, as the norwegians did, as the brazilians did, and so we are seeing, in effect, the beginning of a fascinating chapter two in which the question of the hour and the question of the decade, question of the next two decades is going to be how well can the russians work in partnership and learn what they need to learn from the likes of exxonmobil and bp. and so that's, that's what's at stake right now. >> hi, thane. >> thanks. thanks for your patience. how nice to see you. [laughter] >> nice to see you. you said that in part this book is about guilty love and that if

we asked you, you would tell us about that. [laughter] so i'd like you to tell us about that. [laughter] >> well, true confessions, lee, the guilty love is mine. and although it is unfashionable to confess love for the oil industry, i must say that in the process of researching and writing this book and living this book i have become captivated by the extraordinary ambition of a wager that the oil industry makes every day which is the incredible bet against nature that consists of walking up to what to all appearances looks like an empty, barren piece of real estate and figuring out that anywhere between a thousand and five

thousand feet down there is rock. and by the way, i don't know if you've ever actually seen the rocks that oil comes from. it's amazing. you would, you would walk by on the street and never look twice. gray rock. it's very dense. it looks about as hard and dry as anything you can imagine. and yet inside the microscopic pores of the tough -- and i'm not even talking about shale now, i'm talking about regular sandstone. the shale is even tougher and even tighter. inside there, unbelievably, there are these microscopic pores that happen to be filled with oil. and so there you are making this bet against nature, spending, you know, you can spend -- the sky's the limit on what you have to spend to drill a well, particularly if you're drilling offshore. and you're going to wager this?

over half of the oil production from the united states from the low or half -- from the lower 48 of the united states comes from mom and pop companies, wildcatters that are effectively taking that bet every day. and i must say the more i got into this, the more i found, good lord, this is just amazing. but i've left the best part out, and here's where guilty love turns into passion. and i'm going to talk about tight oil. because tight oil is the latest adventure in this amazing story. it begins, of course, back in the 1920s. this is what we all remember from, say, daniel yergin's book "the prize," which is this marvelous history of the oil industry. we remember in the 1920s your classic wildcatter who then more

or less on a dare and without any knowledge and certainly no knowledge of the geology would drill wells here and there, scraping up money to do it and with no science, no knowledge. now, fast forward a hundred years and where are we know? i have actually witnessed this myself sitting on a platform in the north sea. watching as a geologist or a drilling engineer sits in front of a computer screen and is watching a picture, a picture in full and living color which is being updated every few minutes that shows the structure that a drill bit is going through which the engineer is guiding as he goes. that drill bit is 5,000 feet down and is 10 miles away. and is moving forward along a

horizontal path going through a seam of oil-bearing rock no more than three or four meters thick. and because of that constant visualization, those constant data that are being sent back in realtime from that drill bit as it moves forward, that engineer is guiding that drill bit and that column straight through the pay zone 5, 10 miles out and is getting astounding production. not only that, not only that but every so often along the path of that horizontal well he's doing a frack job. so you've got what they call multistage fracks along this hour so horizontal -- frack, frack, frack, frack. the result of all of that has been the most extraordinary surprise in the history of the oil industry and possibly in the

economic history of the united states in this century. from being dependent on imported oil, we are now on the verge by 2020 of producing some five million barrels a day. five million barrels a day, that's half of saudi production. from tight oil alone. and that oil did not exist except in those stones as recently as five years ago. that is amazing. lee, is that not a love story? [laughter] and, of course, where it gets extremely interesting is that the russians are watching. the russians are watching because there is no reason in principle why the same magic cannot be applied in russia, at least as far as the stones are concerned. the stones may be even more favorable in west siberia than

they are in the lower 48 in the united states. there could be around the corner a renaissance of west siberia. or mother nature could save vladimir putin yet. >> question, do the russians have any revenue ec ports since -- exports of significance apart from oil and gas, or is this basically it in. >> the magic numbers are 53 and 12. 53 is the percentage of russian exports that come from oil. 12% is the percentage of russian exports that come from gas. >> about two-thirds -- >> which is worth keeping in perspective because we may be heading for a first class doneny brook between the europeans and the russians over gas exports. and it's important to remember that the russians are far more dependent on -- [inaudible] >> what percent of the selling price does the russian government get?

>> it gets across the board about 60%, but that's 60% of the gross revenues. if you look at the percentage of the profit at the margins that is taken by the russian government, it's about 95% -- it's above 95%. in other words, the oil companies get to keep very little. >> so it's like a 95% marginal tax rate. >> that's right. it's one of the highest in the world. >> and that's one of the reasons the industry's kind of screwed up, i assume. >> absolutely. that's spot on. >> what, is there any temptation by the russians to solve their little problem here by simply sitting there and maybe even helping out oil prices going to $200 a barrel which might let them coast a little longer? >> they can't do it. they can't do it. the russians -- well, that's the short answer. i'm a professor, after all. they can't do it because the way

the world oil market works is the russians are what they call price takers. that is to say it's a huge bathtub, and whatever you dump in at one end of the bathtub goes into the common bathtub. the russians would have to produce a whole lot more than they do today, which is about 12% of world production, number one. and they would have to have some tuneable capacity. what gives the saudis market power is they have the reserve capacity to tune up or tube down, and they do influence oil prices. but the russians are not in a position to do that. and, indeed, they've never seriously tried. they have talked at times of solidarity with producers. they send observers to opec meetings, but they've never joined, and they show no signs of joining. >> the oil industry's always

been an industry that's very much involved in political oversight, let's put it that way, and it seems to me that russia is probably more so than in many other countries, even including venezuela. it seems to me that the impediment to the growth of the industry is the political system and political constraints in russia. and if they took in the technology that's available, they could rapidly accelerate the production of -- [inaudible] and that seems to be something that's an impediment to what could be a far more productive effort. as someone whose job was with british petroleum, i'd be interested in an answer that question as to why they don't get this thing really rolling. there was a case study with bp which seemed to be that here's a situation where they cut off

their nose the spite their face, and i'd be interested into your insights as to what the bp story was. thank you. >> with good questions. let's see, which one shall i take first? well, on the matter of politics, it's very easy to point the finger at the state. there's no question about it, and you'll see a chapter in the book, several chapter chapters e book that really flesh out that proposition. there's no question but that there is a serious problem in the relationship between the oil industry and the state. the main problem being, of course, the very high level of taxation. but it really is, i guess the larger point that i try to make in the book is that we're really talking about the effects of the soviet ip her dance. -- inheritance in the broadest senses of the world. including a certain cultural inheritance. there is a predisposition to

control, that's the state's fixation that you might say is an inheritance, a classic russian inheritance. there's also a predisposition to resist the kind of market psychology that we take for granted in the united states. and let me give you an example of that. our view is that money today is worth more than money tomorrow, right? of course. the interest rate is all about. except maybe in washington, i don't know. but elsewhere. if money today is worth more than money tomorrow, then oil today is worth more than oil tomorrow. and, therefore, the right and virtuous thing to do if you are a rational market-oriented person is to produce the oil as fast as possible. even if that means that at the end of the day you get less total production from that field.

it is the right and even virtuous thing to do. to maximize the present value of the oil. that's the market approach. that is profoundly offensive to the classic russian oilman. who tends to think in terms of the total geological potential of the field and whose view of the right way to develop the field is to go in, develop it scientifically so at the end you get that last drop out. on the last day, you get the last drop. and i've had conversations with very senior russian oilmen in which they have, their hands are shaking with indignation over what they view as the rape and pillage practices of western oil people. they call it a -- [speaking in native tongue]

and i've heard more than once russian oilmen say you have to respect the oil. well, of course, that's something that western -- [inaudible] so you see what i mean about profound differences in culture which frequently then take political expression. now, as for bp, bp is very much at the center of this story in some respects because it's thanks to bp and john brown, the longtime sew -- ceo of bp, that i actually got into this business. and so at the beginning of the 1990s i was with john brown flying into russia as he sent the first teams of bp people to look over various possibilities. and we went to places like west siberia where a new democratic government had taken over in the wake of a coup or near coup.

of course, we remember the late period of bp and of john brown which was less happy, but in those days he was really the embodiment of the entrepreneur and true. and his vision was that russia was the place to be, but it happened in a way that he never imagined. it happened because through a combination of flukes and circumstances he was able to gain for bp access to one of the prime developed areas, one of what they call in the oil business brown field areas of russia. and in particular the one field that had been the prime field in soviet days called -- [speaking in native tongue] he was able to get an opportunity to gain control of

that field in that area and then applied western technology in conjunction with his partners, and the result was $19 billion in profits. but that was a unique opportunity. it was a fluke, it was a one-time, one-time breakthrough. and in a sense, irrelevant to the larger story and will never happen again. it was an extraordinary struggle. maybe if there's oneless soften to be had -- one lesson to be had, you've got to be there, and when daylight opens in the line, you've got to be ready to go through. so in that sense they were ready to go through, and they did, and they scored. but that was a one-time opportunity. sir. >> i know this is a huge subject, but could you give us some sort of overview about cot love sky and yukos, put it in an american context so that we can

understand it? as i read about it, i just couldn't figure out what was -- whose power play, what was the court's problem, what was stealing and why did all the lukol start opening gas stations all over new jersey? [laughter] >> you bring to mind that for years i've been filling my, filling my tank at a local gas station in -- [inaudible] which happens to be a lucoil station. it was one of the stations taken over by lucoil. so i fill my tank, and then i say to the manager what's this i hear about you're working for the russ keys? [laughter] he's always very shocked. of course, he knows me by now, so we go through a little dance. well, one is the lucoil story which is a very different story because it's a genuinely private

company that emerged out of the ruins of the soviet union. run by an entrepreneur named parov who is, in fact, not russian by azerbaijani who started his career in the -- [inaudible] when he was a young man, he was working on a platform. there was an explosion, and he got blown into the sea in his early 20s. he struck out for west siberia and tried, decided to make his fortune there, and he rose. and he rose, and he was extremely successful, and he became deputy minister of the soviet oil industry. but when everything started to fall apart, he thought, ha, this is my chance. this is my opportunity. and he created the first private oil company. so that's lucoil, and it's quite a story. i'm sorry, i ross the track of -- i lost the track of --

>> cotter cover sky. yes, indeed. he is respected by his colleagues in the oil industry. one of his liabilities within the industry itself is that he was regarded as an upstart. he was a man who came in laterally from a background as one of the people who made phenomenal fortunes in the, at the tail end of the gorbachev period and the first years under yeltsin in finance. that is trading, buying and selling computers, building up from there, developing a bank. he had a bank and so on, so he was a go-go financier. among the assets that he picked up at that time was an oil company which was losing money and was not a particularly

attractive property, but then came the asian flu. you remember the asian flu of 1998 and the crash of the russian economy at that time. and suddenly he was out of the banking business. the bank went broke. and so he was in the oil business. and so he made a go of the oil business. what followed was absolutely remarkable, but the point is that he was free of all these hang-ups about how you've got to respect the oil. he was, in fact, very western, you know? present value oil today is worth more than oil tomorrow, that was his creed, and that's how he went after it, and he brought in westerners to help him do that. and doubled oil production. but the problem is that he was a rebel on every front, and in particular he defied the president. which was a very unwise thing to do. and so he ended up in a

confrontation -- in a blood match with vladimir putin whom he regarded with contempt. he consistently underestimated putin. and i'll give you a little episode that became famous as the symbolic turning point of which people, knowledgeable people in moscow as soon as they heard of this episode realized that he was, well, if not doomed, at least he was going to lose. in february of 2003, so this is eight months before his arrest, putin summoned the oligarchs, that is to say the rich billionaires of russia, the private sector billionaires as he did from time to time. and so there they all are in the kremlin like obedient school chirp, and -- school children, and putin has the center table. and cot cover sky shows up with

a powerpoint presentation on corruption in russia. [laughter] and he gets up, and he says, mr. president, the most serious problem in the russian economy is corruption. and the center, the epicenter of the corruption problem is the russian government, mr. president. and, in fact, the ministry of energy. the minister of energy's sitting right there. and it's also the russian national oil company. and he goes on to talk about all of the ways in which these guys are raking off. at which point putin interrupts. he's been sitting there very calmly x in a very calm tone of voice he says i understand that you have a great many reserves that you are not p developing. and i understand that you, too, are having some problems with paying taxes. and he goes on to list in a very

quiet voice some things that amount to saying that he is maybe himself the center of the corruption problem. and then very thin smile, there are videos of this confrontation. very thin smile, putin says and so, you see, i'm returning the hockey puck to you. [laughter] and there was this laughter, nervous laughter in the room. you can hear it on the tapes. and everybody knew in moscow by the next day that he was finished. so that really is what it comes down to. he defied the man. and so long as the man is there, it's hard to imagine -- [inaudible] we're hearing now vibrations to the effect that maybe they'll let him out early.

>> professor, thank you for your passionate and succinct presentation of the russian oil industry. i was just wondering if you could talk a little bit about the environment and environmental issues. here in this country whenever we talk about new exploration, we're also talking about environmental implications, and we hear about disasters here. we don't really hear much about them in russia, though i'm sure they exist and can be quite massive. so i wonder if you could just talk about that a bit. >> well, here we come to the guilty part of the guilty love. because i'm as conscious as everyone else that we are, in a sense, too clever for our own good. by the way, one of the unfortunate consequences of this bonanza that we are, that we have just, that we are now harvesting is that we are headed

in all likelihood for an era of quite possibly cheaper hydrocarbons and certainly very abundant hydrocarbons. that thing which is so easy to us, which is to climb into our car and drive around to the nearest gas station is something that's going to get easier and easier and easier. for the next generation. and this is very bad news for the environment, there's no question about that. fortunately, in russia they don't have an environment. [laughter] or at least they have frequently behaved as though they didn't have an environment. and certainly the oil industry has never been particularly concerned about the environment. in fact, i remember the early 1990s talking to the minister of environment, environmental scientist. he happened to be very brieflial the min city of geology --

minister of geology, so i met him in this huge office where there were maps, actually, that showed radioactive contamination of the st. petersburg area. so it was quite an interesting office to sit in. i asked him about the environment, and he said we don't have an environment. we can't afford one. and that was very much the story of the 1990s. the signature of the russian hydrocarbon industry is very, it's absolutely conventional up to this point. and their investment level and investment in renewables and unconventionals is at this point effectively minimal with one big exception, and that's nuclear power. if you consider that to be a virtuous renewable. as for solar, well, the agency that is in charge of solar power development is, in fact, subordinated to the nuclear power agency which tells you something. and so on.

so this is a story that has not yet begun. it's something that the russians are going to have to become more conscious of if only for one very direct reason. the entire northern third of russia is permafrost, and it's melting. it's bubbling methane all over the world: and the consequences of a massive melting of permafrost are particularly serious in russia. the economic disruption alone, never mind the environmental consequences. so we're talking about big downsides to this guilty love story. >> one last question. >> thank you very much. to what extent is or was cod or cover sky part of the corruption

problem in russia, and could you say something about the actual and potential impact of russia's ascension to the world trade organization and its getting what used to be called most favored nation trade status? >> well, those are two very different questions, of course. i don't claim to be an expert on, um, the world trade organization. there is a man in the washington area named keith bush who is well known to anybody who has worked on russian affairs these many years who is the world's living expert on russia and the world trade organization. he works for the u.s./russia business council. so i refer you to him. but i think it's a fair prediction that the russians are going to, are going to defend their domestic industries every

step of the way. i think the doctrines of free trade, the doctrines of globalization are not the doctrines that come first to the russians' minds. let's put it that way. and so we shall see. if china is considered a successful member of the wto, why surely russia will be as well. and on fedder cover sky. i think the, i think the fascinating thing about him is that one should resist the temptation to consider him an angel, a martyr or a criminal. he was a man who emerged in a revolutionary time.

he was a student at the time the soviet union fell apart. just graduating as a chemical engineer. he was a political organizer of the institute, he belonged to the leninists briefly. he had that energy. there are pictures of him when he's in high school, and he's just growing his first moustache, and then he became famous for that rackish moustache he had on the public scene. there he is, he's superconfident, he knows he's going to run the world, and when you ask him the high school student what he wants to be, he's going to be a soviet factory director. you know, this is a guy who's on his way. well, those qualities, those animal qualities are the qualities of american capitalists but soviet style. so that plus the fact that he was too young to have experienced really the soviet system and to have grown that

protective cover of dissimulation, that made him an object of fear and hatred by people in the oil industry and then it made him an object of greed by people in the kremlin who looked at him and sized him up as the perfect victim. this was a man who was so provocative in his behavior that all you had to do was lure him forward, and you could count on it. his behavior would become more and more provocative until finally he robbed himself of support within the oil industry, within the establishment. by the time he was arrested, he had only -- the only friends he had left were in the united states. it was, i think, a fascinating tale of destruction, organized destruction and self-destruction.

and it's an shul fascinate -- it's an absolutely fascinating case. >> well, thank you. that was fascinating. [applause] >> tell us what you think about our programming this weekend. you can tweet us @booktv, comment on our facebook wall or send us an e-mail. booktv, nonfiction books every weekend on c-span2. >> from the very start, organized militaries have always spent a lot of their time fighting unconventional, irregular warfare. and you know what? those terms don't make a heck of a lot of sense. that's one of the big takeaways that i had from doing six years of reading and research for this book. the way we think about this entire subject is all messed up. we think that somehow conventional warfare is the norm, that the way you ought to

fight is how these conventional armies slug it out in the open. but the reality is those have always been the exception. just think about the more modern world. what was the last conventional war that we saw? this is a hard question to answer because, in fact, it was the russian invasioning of georgia in -- invasion of georgia in 2008 which didn't last very long. and yet all over the world today there are people who are dying in war whether it's in afghanistan or mali or syria or congo, myanmar, colombia or many other countries. all these people are victims. they're being ravaged by unconventional warfare. >> this weekend, best-selling author max boot on the history of guerrilla warfare today at 7 p.m. eastern on c-span2. >> a look now at some books that are being published this week. former vice president al gore opines on social, political and economic issues that he believes will shape the world in "the future: six drivers of social

change." in "congressman lincoln," attorney and political strategist chris derose recounts abraham lincoln's presidency. journalist sarah garland in "divided we fail." in "engineers of victory," historian paul kennedy details strategies used to secure allied victory. and political science professor jeanne theoharis in "the rebellious life of mrs. rosa parks." watch for the authors in the near future on booktv and on booktv.org. ♪ ♪

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